The explanatory power of log tranformed var has reduced drastically.Also only heteroscedasticity assumption was satified.......

So my dilemma is how can i improve the model so that i get better predictions....should i go for quantile/polynomial or ridge/lasso regression to tackle the imbalanced nature of the data or maybe convert the outcome var into categorical var (bin it into say 3 levels).....??

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$\begingroup$How are you checking the the normality assumption has not been met? The assumption has nothing to do with the distribution of your predictors, but rather the distribution of the residuals$\endgroup$
– SimonNov 14 '16 at 4:45

$\begingroup$One option is to bin the outcome as you say, but what is the nature of that variable? What is it measuring?$\endgroup$
– SimonNov 14 '16 at 4:46